The WSJ reports the performance of Sam Eisenstadt’s, former head of research at Value Line, stock-ranking system from 1965-2012.
Though the system is proprietary, its two primary factors are known as “price momentum” and “earnings momentum.” A stock is ranked higher to the extent its performance over the trailing year has been good and its earnings growth has accelerated. Despite the name “Value Line,” the stocks it favors fall closer to the “growth” end of the spectrum.
The system has been phenomenally successful over the past five decades. From 1965 through 2012, according to data on Value Line’s website, Group 1 stocks on average have gained an annualized 12.9%, before dividends. That’s nearly seven percentage points per year better than the S&P; 500’s 6.1% annualized return over the same period, and more than 22 percentage points ahead of the minus 9.8% return for Group 5.
Once again, the data confirms the effectiveness of price momentum.
[…] This is a small article. From Dorsey Wright research. Requiring additional research on my part. I will try to do that and add more to this post. For my benefit. […]
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